Section 179 Deduction with 2024 Bonus Depreciation
The Section 179 deduction allows businesses to deduct part of a vehicle’s purchase price used for business in the year it is bought. For 2024, you can also use bonus depreciation to deduct an additional percentage of the remaining cost after applying Section 179.
How It Works:
- Section 179 Deduction: Deduct up to $28,900 for a larger vehicle (like an SUV over 6,000 pounds).
- Bonus Depreciation: For 2024, you can deduct 20% of the remaining vehicle cost after the Section 179 deduction.
Example with an $80,000 Vehicle:
Your business buys an SUV for $80,000 and uses it 100% for business.
- Step 1: Apply Section 179 Deduction
- Deduct $28,900.
- Remaining vehicle cost = $80,000 – $28,900 = $51,100.
- Step 2: Apply Bonus Depreciation
- Deduct 20% of the remaining cost.
- Bonus depreciation = $51,100 x 20% = $10,220.
- Total Deductions:
- Section 179 Deduction: $28,900
- Bonus Depreciation: $10,220
- Total Deduction: $28,900 + $10,220 = $39,120
How It Reduces Tax Liability:
If your business’s taxable income is $100,000*, the deductions lower it to *$60,880 ($100,000 – $39,120).
If your federal tax rate is 24%, your tax savings would be:
- $39,120 x 24% = $9,389 saved in taxes.
Result:
By using both the Section 179 deduction and 2024 bonus depreciation on the $80,000 vehicle, your tax bill is reduced by $9,389.
We think this is a great strategy for offsetting additional income in the year you retire when you already plan to purchase a vehicle.
